Relocation of Car Manufacturers: Wise Solution or Costly Setback?


Author

Marian Liviu Mocan
Department of Management, Politehnica University from Timisoara, Timisoara 300191, Romania

Attila Turi
Department of Management, Politehnica University from Timisoara, Timisoara 300191, Romania

Gilles Goncalves
Department of Informatics and Automation, Univ Lille Nord de France, Lille 59000, France

Sorin-Ioan Maistor
Department of Management, Politehnica University from Timisoara, Timisoara 300191, Romania


Content

The paper outlines the current concern of relocation in automotive industry in order to adapt to market conditions by shifting production towards emerging countries. Car manufacturers strive to reduce their operational costs to compensate weak sales in an attempt to overcome the slow market revival and remain globally competitive. The paper focuses on the Dacia-Renault low-cost car policy and uses the case research method to describe differences in consumer behaviour on the French, Romanian and Moroccan car markets. Relevant data and indicators for automotive industry from these 3 countries are analysed and compared by using linear interpolation providing an aggregate indicator with an overview on market dynamics and perspectives. Preliminary results show that drivers of relocation are mainly related to market opportunity, workforce costs and infrastructure. Macroeconomic indicators, acquiring needed skills by local workforce and a good management capacity seem to be more delicate issues. Moreover authorities from emerging countries provide fiscal advantages for car manufacturers willing to relocate their activity or build a new factory as they are a source of wellbeing for its population and economic growth for the country. The research conducts an analysis of advantages and disadvantages of relocation and provides recommendations to improve competitiveness and assure sustainable development of both car manufacturing companies and their supply chain.

Keywords: relocation, automotive industry, supply chain, competitiveness

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Car manufacturing has been one of the most important industries during the last century with an impressive development both on technological and social level. As car manufacturers developed so did their activities, business partners and customers. The complexity of car manufacturing has since increased and today car manufacturing is only a part of automotive industry. The high amount of suppliers which work with car manufacturers have made automotive industry one of the most important employers and sources of a country’s wellbeing. However as car sales in some markets have reached maturity and are achieving only a slow growth margin some car manufacturers have had to temporarily cease activity, lay off workforce and even close down certain factories to adjust to market demand and reduce losses. Changes in consumer behaviour are also shifting after the financial crisis and car manufacturers are trying to adapt their strategies to meet their objectives in a highly competitive market according to Buckley and Carter (1999).

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The proposed methodological approach assumes a twostep comparison of economic indicators which are considered relevant in identifying positive evolution within a company, especially car manufacturers which account for an important impact in national economies. The first step of analysis is to calculate the yearly utilities for the four proposed indicators: GDP, new car registrations (NCR), net profit (NPr) and average net salary (AvSal). Data reported by Renault, Dacia and the National Institute of Statistics from France, Romania and Morocco between the years 2004 – 2013 was processed using linear interpolation in order to make data comparable among each country, resulting in a high level of accuracy for the analysis.

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The market dynamics and perspectives indicator is an aggregate performance indicator which indicates how close one country is towards achieving a positive competitive spiral. The competitive spiral is the effect at a given time generated by the evolution of certain indicators that have the ability to enhance future development for both a car manufacturer and a country by achieving constant growth and providing wellbeing for all stakeholders in a sustainable manner.

Achieving continuous growth is however difficult to achieve and results may sometimes fall from one year to the other. Nevertheless it is important to have a growing tendency throughout the years and engage in performance enhancement which will assure business sustainability. GDP growth is important for macroeconomic stability, new car sales are the key towards achieving profits for carmakers and provide the possibility to continue development and increase employee wages in line with productivity and competitiveness. The latter will be reintroduced into the economy and will continue to support GDP growth for the following years and will thus create the premises for demand to grow within other sectors (including new car sales) and generate more profits which is an important decision factor to raise wages and so on and so forth. A healthy economy will manage to maintain a positive competitive spiral which will generate wellbeing for its population and increase the overall quality of life.

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About Author

Professor Marian Mocan, born on October 23rd, 1961 graduated from the Faculty of Mechanics in 1986. He obtained the Master Business Counselor title at Washington State University SBDC and a PhD in Economics from the West University of Timisoara. He is the Dean of the Faculty of Management in Production and Transportation of the Politehnica University from Timisoara, Romania. He teaches the Basics of management, Logistics, Strategic management and the Management of logistic systems. He collaborates with universities from Europe, Asia and North America. He is a PhD supervisor in the field of Engineering and management since 2010. He has written 14 academic books and over 140 scientific articles. Research areas of interest are Logistics and Supply Chain Management, Strategic Management, Operational Management.

Attila Turi, born on April 6th, 1987 graduated from the Faculty of Management in Production and Transportation in 2010 and obtained his Master’s degree in Logistics from the Faculty of Applied Sciences within the Artois University, France, in 2012. Within the same year he successfully completed the Basics of Supply Chain Management (BSCM) Module and obtained the certification after an exam hosted by APICS. He is currently a PhD student at the Politehnica University from Timisoara, Romania and teaches Industrial and commercial logistics since 2014 and has written 7 scientific articles. His research areas of interest include Performance analysis in the automotive industry, Management, Supply Chain Management and Logistics.

Gilles Goncalves, born on January 11th, 1956 is a full professor at the Artois University, France, since 1994. He studied Computer Science at the University of Lille1 and obtained his PhD in 1985. During 14 years, he was a lecturer and his works concerned parallel and distributed computing. His current research interests include Information systems, Security management, Simulation modeling, Discrete optimization and Metaheuristics. He has written about 20 papers in scientific journals, 5 book chapters and more than 100 scientific communications in conferences. He manages a research laboratory named “LGI2A”, whose main topics are the Organization and management of logistic processes. Sustainable aspects of the supply chain are taken into account in his works.

Sorin-Ioan Maistor, born on October 31st, 1985 graduated from the Faculty of Management in Production and Transportation in 2009. In 2011 he obtained the title of Master in Business Administration (MBA) at the Politehnica University of Timisoara, Romania and is currently a PhD student in the field of Engineering and management. He began his teaching activity in 2009, as an assistant teacher of Economic engineering, Logistics and Maintenance of production systems within the graduated faculty. He has published 15 scientific articles and is co-author of a guide for seminar activities for Economic and financial analysis. Research areas of interest are Logistics and Supply Chain Management, Production Management and Economic Engineering.